The Reserve Bank of Australia (RBA) has decided to keep interest rates on hold at 4.10%. This marks only the second time in the past 14 meetings that the RBA has chosen not to change the rates. RBA Governor Philip Lowe stated that this decision allows the bank to assess the effects of the previous four percentage point hikes before making further decisions. The current higher interest rates are aimed at establishing a more sustainable balance between supply and demand in the economy.
The RBA's decision to hold interest rates steady this month was influenced by the release of the monthly consumers index from the Australian Bureau of Statistics, which showed a retreat in headline inflation. In May, inflation fell sharply to 5.6%, the lowest it has been in over a year. Governor Lowe mentioned that the RBA board would monitor global economic developments and household spending trends, considering that underlying inflation had only slightly decreased.
Despite the high interest rate environment, the property sector in Australia is still facing an under supply, which provides support for house values. According to CoreLogic, the number of capital city homes advertised for sale is about 26% below the previous five-year average, and dwelling approvals remain below average levels. Additionally, the housing market is benefiting from record net migration and extremely tight rental conditions. These factors help offset some of the impact of higher interest rates on the housing sector.